How Does the New Tax Bill Affect Farmers?


The new tax bill has been on many people’s minds, and none more so than farmers. The Farm Bureau endorsed both the House and Senate versions; however, as the New York Times reports, “Some of the president’s policies could actually harm the farm industry. New analyses of the tax law by economists at the Department of Agriculture suggest it could actually lower farm output in the years to come and effectively raise taxes on the lowest-earning farm households, while delivering large gains for the richest farmers.”

In a January 8 speech to the Farm Bureau convention in Nashville, President Trump stated that the tax overhaul will cut taxes by $5.5 trillion, and that most of those cuts will go to “working families, small businesses, and—who?—farmers.” In reality, individuals would receive $1.1 trillion, over 10 years, in tax cuts. According to the Times, “That falls to under $1 trillion when excluding tax cuts for businesses income from so-called pass-through companies, which are taxed through the individual code.”

Here are the major changes growers need to know about. The new tax bill:

  • Lowers tax rates for pass-through entities, including sole proprietorships, LLCs, partnerships, and S corps. Some experts estimate that only farms with around $1 million in annual sales—about 4 percent of U.S. farms—are in a high enough tax bracket to benefit from the lower rate.
  • Offers a new farm-equipment depreciation schedule: five years instead of seven.
  • Eliminates the Section 199 deduction, which allows farm co-ops to deduct a portion of their expenses and. According to the National Council of Farmer Cooperatives, this deduction is responsible for saving farmers in co-ops $2 billion annually in tax liabilities. Mother Jones reports that following pressure from agricultural groups, Senator John Thune (R.-S.D.) inserted a provision into the bill that would give co-ops a 20% deduction, the same as pass-through entities, “though it wouldn’t fully offset the loss of Section 199.”
  • Makes health care less affordable for many. Farmers relying on Obamacare for health insurance may lose or end up paying significantly more for health coverage. It’s estimated that 17.6 percent of farm households currently get their health insurance through the individual market.
  • Puts federal farm spending in danger of being cut due to the budget shortfall created by the bill. As Mother Jones puts it: “The Congressional Budget Office calculated that the Senate version of the tax bill would likely add $1.4 trillion to federal budget deficits over the next decade.” These may affect farm subsidies and crop-insurance support.
  • Increases the federal estate tax exemption to $11.2 million for individuals and $22.4 million for a couple. While this is an undeniable boon, experts note that it’s likely to affect less than 2 percent of farms.
  • Eliminates deductions for state taxes and mortgage interest, as well as property taxes. It may be possible to make a property tax prepayment for 2018 early and deduct it on your 2017 bill, but regulations vary by county and municipality. Ask your town tax collector if this is an option that’s open to you.

We’ll keep you posted on changes to the tax bill and how they affect you over the coming months.